All insights

We wrote a blog a month ago, “January: the Month of ABS-tinence”, about the level of new issuance in the European ABS market, and the slightly counter-intuitive impact it was having.

For fixed income investors, it has been impossible to ignore the proliferation of press coverage about the growth of the triple-B rated corporate bond market, and a coming wave of downgrades for companies rated BBB to high yield, with these ‘fallen angels’ exposing investors to mark-to-market losses at best, and defaults at worst.

Investors have rightly been concerned about the coordinated global economic slowdown, but in Europe it has been worse than that with the major economies flirting with recession. Consequently investors have been cautious on European assets, but has this caution now reached its peak?

Over the past couple of quarters we have been inundated with questions regarding the banking sector, and in particular how it will perform should the current economic cycle deteriorate.

Yesterday the Office for National Statistics released strong data on the UK labour market, which was music to the ears of UK RMBS investors. The headline unemployment rate stands at 4.0%, roughly unchanged for the last six months and at the lowest level seen in the last 45 years. There are an estimated 32.6 million people employed, 444k more than a year earlier, and more importantly average weekly earnings grew by 3.4% (the highest for over 10 years and 1.2% in real terms).

The big news yesterday came from Santander, when the Spanish lender finally announced, just a few minutes before the deadline expired, that it wouldn’t be calling its 6.25% AT1 on the first call date of March 12.